Exhibit 10.27
CONFIDENTIAL TREATMENT REQUESTED
TERMINATION AGREEMENT
[LOGO OF INTERPLAY ENTERTAINMENT CORP. (TM) APPEARS HERE]
This TERMINATION AGREEMENT (this "Agreement") is entered into effective as
of February 10, 1999 (the "Effective Date") by and among INTERPLAY ENTERTAINMENT
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CORP., a Delaware corporation whose principal place of business is at 00000 Xxx
Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000 (hereinafter "Interplay"), VIRGIN
INTERACTIVE ENTERTAINMENT LIMITED, a corporation formed under the laws of
England and Wales whose principal place of business is at 0 Xxxxxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxx, X0 5 RB (hereinafter "Virgin"), VIE ACQUISITION GROUP, LLC, a
Delaware limited liability company ("VIE Acquisition Group") and VIE ACQUISITION
HOLDINGS, LLC, a Delaware limited liability company ("Holdings") with respect to
the following recitals:
RECITALS
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A. VIE Acquisition Group, of which Holdings is the only member, has
acquired all of the capital stock and the underlying business of Virgin pursuant
to that certain Sale and Purchase Agreement dated November 6, 1998 by and
between Viacom International Inc. and Spelling Entertainment Group Inc., on the
one hand, and VIE Acquisition Group, on the other hand (the "Viacom
Transaction").
B. Contemporaneously herewith, Interplay and Holdings are entering into an
Operating Agreement (the "Operating Agreement") with respect to the operation of
VIE Acquisition Group, Interplay and Virgin are entering into an International
Distribution Agreement (the "Distribution Agreement") of even date herewith with
respect to the distribution by Virgin of certain of Interplay's products in
Europe and certain other territories and a Product Publishing Agreement (the
"Publishing Agreement") of even date herewith with respect to the publishing by
Interplay of certain of Virgin's products in North America and certain other
territories.
C. Interplay, Virgin and Holdings desires to enter into this Agreement to
set forth their rights with respect to the termination of their relationship
upon the occurrence of certain events.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
agreements and promises set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. CHANGE IN CONTROL.
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(a) Interplay Right to Withdraw. Notwithstanding anything to the
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contrary in the Operating Agreement, the Distribution Agreement or the
Publishing Agreement, in the event of a
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Change in Control (as defined below) of Interplay, Interplay shall have the
right to withdraw as a Member from VIE Acquisition Group under the terms and
conditions set forth in this Section 1 by written notice to VIE Acquisition
Group (the "Change of Control Termination Notice"). Within ten (10) business
days of receipt of the Change of Control Termination Notice by VIE Acquisition
Group, VIE Acquisition Group shall deliver to Interplay by its good faith
estimate of the Supplemental Fee (the "Supplemental Fee Estimate"). Interplay
shall thereafter have ten (10) business days to revoke its Change of Control
Termination Notice by delivery of written notice to VIE Acquisition Group. If no
such revocation is made by Interplay, the parties shall proceed to determine the
actual Supplemental Fee in accordance with this Section 1. In the event the
actual Supplemental Fee exceeds the Supplemental Fee Estimate by more than
[*], Interplay shall have the right to revoke the Change of Control Termination
Notice by delivery of written notice to VIE Acquisition Group within ten (10)
business days of its receipt of the notice of the actual Supplemental Fee. In
the event Interplay delivers a Change in Control Termination Notice to VIE
Acquisition Group, Interplay shall automatically be deemed to have surrendered
its rights to vote and participate in the management of VIE Acquisition Group
effective upon delivery of the Change of Control Termination Notice and shall
transfer to Holdings its Membership Interest (as defined in the Operating
Agreement) for the sum of [*] effective as of the close of business on the last
day Interplay may deliver notice of revocation of the Change in Control
Termination Notice (a "Revocation Notice") pursuant to this Section unless prior
to such time a Revocation Notice is properly delivered to VIE Acquisition Group,
in which event all of Interplay's rights as a Member of VIE Acquisition Group
shall be reinstated.
(b) Buy-Out Fee. Interplay shall pay to Holdings the amount of [*]
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Dollars (US$[*]) as the buy-out fee (the "Buy-Out Fee") for exercising the right
to withdraw from VIE Acquisition Group granted to Interplay pursuant to Section
1(a) of this Agreement.
(c) Supplemental Fee. In addition to the Buy-Out Fee in paragraph (b)
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above, for exercising the right to withdraw from VIE Acquisition Group granted
to Interplay pursuant to Section 1(a) of this Agreement Interplay shall pay to
VIE Acquisition Group an additional amount (the "Supplemental Fee") equal to
Interplay's Gross Profit Contribution Percentage (as defined below) of the Shut
Down Costs (as defined below) of Virgin, determined in accordance with
subparagraph (h)(F) below.
(d) Interplay Right to Terminate Distribution Agreement. In the event
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Interplay elects to exercise its rights under this Section 1 and withdraws as a
Member from VIE Acquisition Group pursuant to Section 1(a) above, Interplay
shall have the right by delivery of notice of termination of the Distribution
Agreement together with the Change of Control Termination Notice to terminate
the Distribution Agreement without liability to Virgin, such termination to be
effective upon that date which is [*] days following delivery to Virgin of the
Change of Control Termination Notice (the "Change of Control Termination Date"),
unless prior to the close of business on the last day Interplay may deliver a
Revocation Notice Interplay properly delivers a Revocation Notice to Virgin, in
which event all of the parties' rights and obligations under the Distribution
Agreement shall be reinstated.
(e) Virgin Right to Terminate Publishing Agreement. In the event
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Interplay elects to terminate the Distribution Agreement pursuant to this
Section 1, Virgin shall have the right to terminate the Publishing Agreement
without liability to Interplay, such termination to be effective upon the Change
in Control Termination Date, unless prior to the close of business on the last
day Interplay
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*Portions omitted pursuant to a request for confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
may deliver a Revocation Notice Interplay properly delivers a Revocation Notice
to Virgin, in which event all of the parties' rights and obligations under the
Publishing Agreement shall be reinstated.
(f) Adjustments. Interplay shall have the right to continue to supply
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its back catalogue products for distribution by Virgin and in such case the fair
market value to Virgin of the back catalogue rights provided to Virgin, as
determined (in the same manner as Shut-Down Costs) by the accounting firm
selected under paragraph (h)(F) below, shall be applied dollar for dollar as a
credit towards payment of the Supplemental Fee, and up to $[*] of any remaining
credits shall be applied dollar for dollar as a credit towards payment of the
Buy-Out Fee.
(g) Payment of Fees. The Buy-Out Fee and the Supplemental Fee shall
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be paid to Virgin on the Change of Control Termination Date. Interplay or its
successor may, at their option, pay the Buy-Out Fee and/or the Supplemental Fee
in cash or Marketable Securities (as defined in the Operating Agreement) or any
combination thereof.
(h) Definitions. For purposes of this Agreement the following terms
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shall be defined as:
(A) "Aggregate Gross Profit Contribution" shall mean the sum
of (i) the Interplay Gross Profit Contribution, plus (ii) the aggregate net
distribution fee earned by Virgin on all other third party products distributed
by Virgin, plus (iii) the gross profit (i.e., sales less cost of goods, less
development costs attributable to such sales) of products published by Virgin,
plus (iv) royalties earned by Virgin other than under the Publishing Agreement,
in each case for the LTM Period.
(B) "Change in Control" shall have the meaning ascribed to
such term in the Operating Agreement.
(C) Interplay's "Gross Profit Contribution Percentage" shall
mean the percentage calculated by dividing the Interplay Gross Profit
Contribution by the Aggregate Gross Profit Contribution of Virgin.
(D) "Interplay Gross Profit Contribution" shall mean [*] of
the Net Sales attributable to Interplay Products for the LTM Period.
(E) "LTM Period" shall have the meaning ascribed to such term
in Section 1.9 of the Operating Agreement.
(F) "Shut Down Costs" shall mean the amount by which the fair
market value of the liabilities of Virgin exceeds the fair market value of the
assets (including intangible assets) of Virgin measured as of the date of the
Change of Control Termination Notice and assuming the operations of Virgin were
to be shut down as of such date with all liabilities discharged in full and all
assets liquidated, as determined in accordance with generally accepted
accounting principles by an independent "Big Five" accounting firm that has not
represented either party in the preceding five (5) years, selected by mutual
agreement of the parties. If the parties are unable to agree on such accounting
firm within thirty (30) days following delivery by Interplay of the Change of
Control Termination Notice, each Interplay and VIE Acquisition Group shall each
designate any Big Five accounting firm of
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*Portions omitted pursuant to a request for confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
their choosing to determine the Shut Down Costs. Within forty-five (45) days
after appointment, such accounting firm or firms as are appointed shall
determine its initial view as to the Shut Down Costs and, if more than one
accounting firm is appointed, consult with one another with respect thereto.
Within 75 days after the date of delivery of the Change of Control Notice, the
accounting firm, or, if more than one accounting firm is appointed, each
accounting firm, shall have determined its final view as to the Shut Down Costs.
If more than one accounting firm is appointed: (a) If the difference between the
higher of the respective final views of the two accounting firms (the "Higher
Shut Down Costs") and the lower of the respective final views of the two
accounting firms (the "Lower Shut Down Costs") is less than 10% of the Higher
Shut Down Costs, the Shut Down Costs determined shall be the average of those
two views, or (b) otherwise, the two accounting firms shall jointly designate a
third accounting firm (the "Mutually Designated Firm") to determine the final
Shut Down Costs, and within 15 days of such designation, the Mutually Designated
Firm shall determine its final view as to the Shut Down Costs (the "Mutual Shut
Down Costs") and the final determination of the Shut Down Costs shall be the
average of (i) the Mutual Shut Down Costs and (ii) the Higher Shut Down Costs or
the Lower Shut Down Costs, whichever is closer to the Mutual Shut Down Costs.
Virgin shall provide reasonable access to each of the designated accounting
firms to members of management of Virgin and its Subsidiaries and to the books
and records of Virgin and its Subsidiaries so as to allow such accounting firms
to conduct due diligence examinations in scope and duration as are customary in
valuations of this kind. Each of the parties and any permitted assignee (on its
own behalf and on behalf of its respective Affiliates) agrees to cooperate with
each of the accounting firms and to provide such information as may reasonably
be requested. Costs of the determination of the accounting firms shall be borne
equally by Interplay and VIE Acquisition Group.
(i) Liquidated Damages. Each party acknowledges and agrees that (i)
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the withdrawal from VIE Acquisition Group and the termination of the
Distribution Agreement pursuant to this Section 1 by Interplay shall result in
VIE Acquisition Group, Virgin and Holdings incurring certain costs and other
damages in amounts that would be extremely difficult or impractical to
ascertain, and (ii) the provisions and payments described in this Section 1 bear
a reasonable relationship to the damages and losses which Virgin, Interplay and
Holdings estimate may be suffered by Virgin and Holdings. Accordingly, the
provisions and payments described in this Section 1 shall constitute liquidated
damages and shall be the sole and exclusive remedy of Virgin, VIE Acquisition
Group, Holdings or any member or shareholder thereof arising out of any
withdrawal from VIE Acquisition Group and termination of the Distribution
Agreement pursuant to this Section 1.
(j) Inventory Sell-Off Right. In the event of termination of the
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Distribution Agreement pursuant to Section 1(d) above by Interplay, the [*]
inventory sell-off right under Section 13(e) of the Distribution Agreement shall
not apply.
(k) Defined Terms. All capitalized terms and phrases not defined in
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this Agreement shall have the meaning set forth in the Distribution Agreement.
2. TERMINATION FOR BREACH. In addition to Interplay's rights under
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Section 1 above, in the event of the termination of the Operating Agreement by
Interplay due to any uncured breach thereof by VIE Acquisition Group, Interplay
may elect, in its sole discretion to terminate the Distribution Agreement
effective immediately.
3. CONSEQUENTIAL DAMAGES EXCLUSION.
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*Portions omitted pursuant to a request for confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
NEITHER PARTY WILL UNDER ANY CIRCUMSTANCES BE LIABLE TO THE OTHER
PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL OR SPECIAL LOSS OR DAMAGES ARISING OUT
OF THIS AGREEMENT, THE TERMINATION OR EXPIRATION OF THIS AGREEMENT IN ACCORDANCE
WITH ITS TERMS OR WITH RESPECT TO THE INSTALLATION, USE, OPERATION OR SUPPORT OF
THE PRODUCT, EVEN IF APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
4. NOTICES.
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Any notice, consent, approval, request, waiver or statement to be
given, made or provided for under this Agreement shall be in writing and deemed
to have been duly given (i) by its delivery personally; (ii) by its being sent
via facsimile (confirmed in writing); or (iii) five (5) days after delivery by
courier requiring receipt upon delivery, or mail, return receipt requested,
addressed as follows:
TO INTERPLAY: INTERPLAY ENTERTAINMENT CORP.
00000 Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Chief Executive Officer
With a Copy To: INTERPLAY PRODUCTIONS LIMITED
Harleyford Manor, Harleyford
Xxxxxx Xxxx, Xxxxxx
Xxxxxxxxxxxxxxx XX0 0XX
England
Attn: Xxxxx X. Xxxxxxx
And To: X.X. Xxxxxx, Esq.
XXXXXXXXX XXXXX XXXXXXX & XXXXX
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
TO VIRGIN : VIRGIN INTERACTIVE ENTERTAINMENT LIMITED
0 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxx X0 0XX
Attn: Chief Executive Officer And
Chief Financial Officer
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With a Copy To: Xxxxxx Xxxxxxxx, Esq.
TROOP XXXXXXX XXXXXX XXXXXXX & XXXXX, LLP
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000-0000
IF TO VIE
ACQUISITION GROUP
OR HOLDINGS: VIE Acquisition Group, LLC
0000 Xxxxxxx Xxxxxx Xxxx.
Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Attention: Xxxx Xxxx
With a Copy To: Xxxxxx Xxxxxxxx, Esq.
TROOP XXXXXXX PASICH REDDICK & XXXXX, LLP
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000-0000
or such other address as either party may designate by notice given as
aforesaid.
5. GENERAL PROVISIONS.
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(a) Assignment. Neither this Agreement, nor the parties' rights and
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obligations hereunder, may be transferred, assigned or sublicensed to a third
party, without the prior written consent of the other party; provided, however,
that either party may transfer or assign its rights and/or obligations hereunder
to any person acquiring such party by merger or acquiring all or substantially
all of such party's assets, including substantially all of the Products (and
where such party agrees in writing to assume the assignor's obligations under
the Publishing Agreement and Distribution Agreement), without requiring the
consent of the other party; and provided further, however, that Holdings and /or
VIE Acquisition Group may transfer or assign its rights hereunder to Virgin.
(b) Entire Agreement. This Agreement and the exhibits hereto
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constitute the complete and exclusive agreement between the parties with respect
to the subject matter hereof, superseding and replacing any and all prior or
contemporaneous agreements, communications, and understandings (whether written
or oral) regarding such subject matter. This Agreement may only be modified, or
any rights under it waived, by a written document executed by both parties.
(c) Governing Law; Arbitration. This Agreement is governed by
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California law, without regard to its choice of law rules. The parties
expressly waive the application of the United Nations Convention on Contracts
for the International Sale of Goods to the terms of this Agreement. Any
controversy or dispute arising out of or in connection with this Agreement
(including the interpretation of any of the provisions hereof), other than
requests for immediate equitable relief (each, a "Disputed Matter"), shall be
settled by arbitration in accordance with the provisions of Attachment 17.20 to
the Operating Agreement, the provisions of which are incorporated herein by this
reference, except that references to the "Agreement" therein shall be deemed to
be references to this Agreement for purposes hereof.
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(d) Waiver. The failure of either party to exercise or enforce any of
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its rights under this Agreement will not act as a waiver, or continuing waiver,
of such rights.
(e) Independent Contractor. Each party shall be and remain an
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independent contractor and nothing herein shall be deemed to constitute the
parties as partners. Further, except as expressly provided herein, neither
party shall have any authority to act, or attempt to act, or represent itself,
directly or by implication, as an agent of the other or in any manner assume or
create, or attempt to assume or create, any obligation on behalf of or in the
name of the other, nor shall either be deemed the agent or employee of the
other.
(f) Force Majeure. Neither party shall be responsible for any failure
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to perform due to causes beyond its reasonable control (each a "Force Majeure"),
including, but not limited to, acts of God, war, riot, embargoes, acts of civil
or military authorities, denial of or delays in processing of export license
applications, fire, floods, earthquakes, accidents, breakdown of machinery,
shortages of materials, inability to obtain labor, strikes or fuel crises,
provided that such party gives prompt written notice thereof to the other. The
time for performance will be extended for a period equal to the duration of the
Force Majeure, but in no event longer than sixty (60) days.
(g) Counterparts. This Agreement may be signed by telecopy and in
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counterparts, each of which counterpart shall be deemed an original and all of
which counterparts when taken together, shall constitute but one and the same
instrument.
(h) Severability. If any provision of this Agreement is, becomes, or
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is deemed invalid or unenforceable in any jurisdiction, such provision will be
enforced to the maximum extent permissible in such jurisdiction so as to effect
the intent of the parties, and the validity, legality and enforceability of such
provision shall not in any way be affected or impaired thereby in any other
jurisdiction. If such provision cannot be so amended without materially
altering the intention of the parties, it shall be stricken in the jurisdiction
so deeming, and the remainder of this Agreement shall remain in full force and
effect.
(i) Language: Order of Precedence. This Agreement has been written
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in the English language, and it may be translated, for convenience, into other
languages. However, in the case of error or disagreement, the executed English
language version shall prevail. This Agreement amends the Distribution
Agreement, the Publishing Agreement and the Operating Agreement. In the event
of any inconsistency between the terms of this Agreement and the terms of the
Distribution Agreement, the Publishing Agreement or the Operating Agreement, or
any other agreement entered into in connection herewith, the order of precedence
shall be:
(A) This Agreement;
(B) The Distribution Agreement;
(C) The Publishing Agreement; and then
(D) The Operating Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by respective duly authorized representatives as set forth below.
INTERPLAY:
INTERPLAY ENTERTAINMENT CORP.
By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
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Title: CEO
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VIRGIN:
VIRGIN INTERACTIVE ENTERTAINMENT LIMITED
By: /s/ Xxxx Xxxx
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Name:
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Authorized Agent
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HOLDINGS:
VIE ACQUISITION HOLDINGS, LLC
By: /s/ Xxxx Xxxx
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Name:
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Title: Manager
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VIE ACQUISITION GROUP:
VIE ACQUISITION GROUP, LLC
By: /s/ Xxxx Xxxx
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Name:
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Title: Manager
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